A flat week for bonds, with half a day slightly in the red, followed by a slightly more positive half-day... in both cases, the gaps remained insignificant.

Bunds re-tested 2.60% before easing -1Pt to 2.59%, our OATs, which had tested 3.10% at around 3 p.m., erased -1.5Pt to 3.070% this evening (i.e. +7Pts over the week), while Italian BTPs posted -1Pt to 3.89%.

This tension stems from the week's news flow, which only reinforces the feeling that inflation remains a problem for the US economy and the FED.
In Europe, the rise in the PMI indexes attesting to the economic recovery could also bring more inflation via wages and import prices (tax war between the EU + the US then China).


T-Bonds are stabilizing at 4.475% for the '10-yr' and 4.934% for the '2-yr' despite new 'robust' US figures: durable goods orders rose by 0.7% in April in the US (after +0.8% in March), whereas they had been expected to fall by 0.9%. Excluding defense and aerospace, they rose by 0.3% versus +0.1% expected, after -0.1% in March.

At 4 p.m., investors discovered the Michigan consumer confidence index: it came in 1.7Pt higher than expected in May, at 69.1... but significantly down on April's 77.2.
The prospect of interest rates remaining at their highest level for several months to come is weighing on consumers' plans.

In Europe, business sentiment in France was stable in May compared with April, with the synthetic indicator calculated by Insee holding steady at 99, just below its long-term average (100).

Across the Rhine, the German economy grew by 0.2% in the first quarter compared with the previous three months, thanks to buoyant exports and investment spending, according to detailed statistics published on Friday, confirming the initial estimate.

Finally, across the Channel, the Gilts continued to deteriorate - albeit marginally - testing their worst weekly score of 4.305%: this represents +15pts over the past week, and +25pts since the morning of May 16.


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